Saturday, January 10, 2009

Well the 2008 hsbc numbers are out. In a year that one would be shocked there were any winners at all (except for Paulson of course... Paulson could make money on Pluto, blind, limbs chopped off, without oxygen, a bloomberg terminal or his copy of Dow 100,000: Fact or Fiction), here are the funds that will shortly need to raise all gates once investors realize these are likely the only places where money can still be redeemed:

Not many household names except for the notably insanely cool sounding Artridis Barracuda. If that is not a name worthy of a first-born, I have no idea what is.

And now here are the losers... Many funds probably decided to issue a cease and desist order from publishing their performance at some point after August (here's looking at you Jeff Gandell) as they are strangely missing from the list and very glad you can be down at most 100%. But here it is for what it's worth (not a whole lot).

Not much can be gleaned from this list aside from the ironclad conclusion that if you ever trust your money with any sneaky fucking Russian (Putin, V.I. Ulyanov, Boris the Blade "as bent as the Soviet sickle, as hard as the hammer the crosses it"), you will inevitably be collecting the perishables out of the dumpster in front of 133 East 64th Street, looking for Bernie's huggies to sell on Ebay.

Aside from the bloodbath above, some other notable capitalist virtuosos include the following:

So Yeah, Wow.... And all you newly unemployed analysts who are going on interviews with any of the guys above with hopes they are going to actually hire you instead of just stealing all your best ideas (it wasnt called a Hedge Fund Hotel during the "good years" for nothing), and likely liquidate in 6-12 months, you have my deepest sympathies.
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Just as our funny-speaking cousins 3 hours east of us (via Concorde; probably more like 15 hours if using one of American Airlines' retrofitted B-707 with almost two wings and a fully operational engine, and that includes the 8 hour unairconditioned tarmac wait at JFK and Heathrow) thought that the Waxman witch trials would be confined to the likes of Jim Simmons and Phil Falcone (whose wife Lisa has given over $111,000 in political donations in 2008 and prudently hedged (one would say much better so than her husband in the last year; Lisa is listed as "homemaker" on her political donation records, and what a home it is... maybe it is only fitting that it used to house Penthouse honcho Bob Guccione previously, keeping in mind the hits one gets when the name Lisa Falcone is referenced in IMDB) equally between Democrats and Republicans, throwing money away in the losing presidential campaigns of both Rudy Giulliani and Chris Dodd), the tables turn, and the most prominent reps of London's oracular class are suited to be cross-examined by the Commons Treasury Committee, the local equivalent of public semi-lynching, On January 27. Among HF managers expected to say nothing relevant are Paul Marshall of Marshall Wace, Doug Shaw of Blackstone, Chris Hohn of The Children's Investment Fund and Crispin Odey of Odey Asset Management.

In what has become a traditional pin the great depression on the rich HF dude spectacle, 14 or so Members of Parliament, led by undisputed genius John McFall who still refuses to speak to the FSA for daring to lift the ban of shorting financial stocks, will ask stupid questions and get answers in kind.

Seems Britain is at a loss for creating its own political/financial drama and so just tries to replicate Big Brother: Wall Street. Up next - the UK version of Sir Bernard Madoff, to be followed by the first African-American er... English king in history.

Yep folks, the man, the myth, the my-mom-does-my laundry womanizer may be gone (only temporarily - you can't get rid of Tim Sykes... something about weeds or cockroaches), but his spirit lives on. Just click here: http://www.greenwichtime.com/ci_11421481

The Hedge dream is so engrained in the DNA of 21st century BSDs that "no" is not an answer. Seems "Thresher Global Management" consisting of two 25 year-old harvard graduates, one of whom has 2 years extensive experience in a Fort Lee Private Equity firm while the other worked 2 years in a PE firm in Guatemala City, will take the world by storm as the dynamic duo "business acumen and successful track record will speak for itself in attracting new investors". The secret to this new 2 and 20 bonanza's success: "The volatility in the stock is a "boon" to Thresher, which expects to concentrate on taking long and short positions on investments."

...Is 10,000 lawyers at the bottom of the ocean... This is even more true if you are involved in the bankruptcy of recently defunct Tribune (well if you are Sam Zell you wake up, you look in the mirror and can go back to bed happy cause you are so damn handsome) especially as a creditor, the recent retention application for Sidley Austin would make your greedy black heart churn with arrhythmia. As disclosed in the application, associates will fluff your pillow for $240 to $650 an hour; counsel will cut your milk for you for $400 to $875/hour, and partners will gladly xerox blank page after blank page for a measly $1,100.... Yes you heard that right, $1,100 per HOUR, for HOUR AFTER HOUR... WTF? That's on par with Emperors VIP Club's BBBJ hourly rates, and in all honesty I would rather spend it on this than on this...

So let's do some simple math here. Assuming 4-5 partners, "working" hard anywhere between 10 and 30 hours a day (uh, yes... click here for more), 6 days a week (cause you have to tell the wife/husband you are in the office on Sunday night when you are really at the grand reopening of Studio 54), and these partners have around 10 henchmen running around spilling coffee, tying shoelaces and keeping a spot in line for Giants tickets, you quickly run up a bill of $120,000/day, or $3.6 million a month, or $43 million a year.... Assuming this bankruptcy lasts the usual 2.5 years, than Sidley will take a cool $100 million straight from creditors' pockets.

Now that in itself would be ok if that's the extent of the vulture fest, but hold on.... Enter stage right we have the usual procession of grave robbers. The application of the turnaround expert Alvarez and Marsal lists hourly rates from $175 to $750 (take a wild guess which one will be the dominant), Jenner and Block joins the fray as "Special Counsel for Certain Litigation Matters" charging on an hourly basis "in accordance with its ordinary and customary rates" which range from $160 to $1,000/hour, and the list goes on: PWC hired as Tax Advisors, McDermott Will and Emery as Special Counsel for Domestic Legal Matters, Paul Hasting as Special Counsel for General Real Estate and Related Matters, Reed Smith as Special Counsel for Certain Litigation Matters; Cole, Schotz, Meisel, Forman and Leonard as Co-Counsel to the Debtors (I guess this is in case the Sidley Austin Xerox Machine is broken and Kinko's across the street is bankrupt) and last but not least Lazard as Financial Advisor. All these counsels, special counsels and whatnots will likely milk the company for about $15 million a month, meaning the professional fees amassed during the bankruptcy will cost roughly half a billion dollars, as Tribune's employees are fired in droves. And this doesnt even include all the financial advisors that each separate class of security will likely need to hire as in for example the case of the 4th lien double secret subordinated bonds convertible into Double Whoppers, which will fight tooth and nail to prove their claims are worth at least par.

Based on some simple math half a billion would result in about a 5 cent recovery on the Company's $11 billion of total debt. It is a little odd that creditors aren't screaming bloody murder over this daylight rape.

Friday, January 9, 2009

After losing his shirt, bifocals, and the backup tire of his Jeep Cherokee by assuming that Ford and GM are actually competitive in the global car market, Kirk Kerkorian is allegedly selling one of his prize jewels on the LV strip: the MGM Mirage. While the sale seems a little odd at first, it makes sense when one considers the insatiable money pit that the CityCenter project has become for the nonogenarian. After scrapping wave after wave of amenity at CC (gold plates bidets are out, plywood outhouses are in) and still being over budget by billions of US pesos, the old man has drawn a line in the sand, first by selling Treasure Island and now apparently the Mirage itself. In July 2008 Penn National was left at the altar by Fortress and Centerbridge, but ended up in possesion of the $1.25Bn engagement ring (preferred stock by its cold-feeted PE suitors, which incidentally is now worth a lot more than FIG's market cap), and like any spurned lover vowed to take over the world, or in this case Las Vegas. As CEO Peter Carlino was quoted in a Bloomberg interview in November," We would like to come to Las Vegas, but only under the right circumstances. We do not want to build new here. This is not a place to go spending capital on new construction because it’s too unpredictable, too dangerous and way beyond our risk profile. Coming here will mean finding the right existing property under construction or existing." and "There’s lots of properties we’d love to own in Las Vegas." Like Spearmint Rhino (Ed.)

The biggest winners of this would probably be the bondholders of the MGM Mirage $750 Million 13% Secured Notes of 2013, which were issued in the low 90s two months ago and have a 101% Change of Control put clause. The Notes hit a low of 78 in late November around the time the world was coming to an end and Vik Pandit had dropped his pants while soapfishing in Paulson's company. The annualized return on that investment would likely be in the 60% range. As an added bonus, this will likely further infuriate that one guy on the syndication conference call who almost got into a fight with Dan D'Arrigo for reasons unrecalled.

As is a customary when dealing with rumors of this nature, MGM's and Penn's version of the situation ranged from "no comment" to " just rumors".... but we all know better... And hopefully once the rumored sale closes, we get the gold plated bidets back at CityCenter, cause obviously that is all that is stopping all the newly and oldly minted real estate billionaires and Kuwaiti sheiks from taking the G5 for the weekly jaunt to the Spearmint Rhino.

It is good to see that even as the good men leaving the yellow van carrying a straight jacket (specifically outfitted with a bro/manzier for obvious purposes) are climbing up the arduous 59 story staircase to the top of Citigroup Center (the elevator bouncers are there of course not just to accept TARP funding with open 24 inch pythons but to keep any semblance of the real world out), to prevent Count Vikula from self-inflicting any further acts of razor-sharp, efficient capitalism to himself, Citi's analysts have not lost their sense of humor. In a Jan 8 report, C analyst Glen Yeung boldly claimed that the shitty half of the telecom industry will likely be acquired by the less shitty half. Companies such as Texas Instruments, Marvel and Freescale (with its $9.3 billion of debt trading in the 40s much to the pride of its proud market-top-ticking PE daddies) would be aquired by smallish Broadcom and smallisher Infineon. While we would heartily enjoy the image of junior buyside analysts justifying to their overpaid seniors the validity of triple digit pro forma leverage, we are somewhat skeptical about this proposition. After all in November, Glen said he expects Intel, Qualcomm, Nvidia, Altera, ST Micro and Integrated Device Technology to return 43% over the next 12 months (presumably before this bombshell from Intel). Of course, in this volatile market it is also very likely the Glen is absolutely correct and we stand with baited breath to sell our 3 shares of Intel stock at $23 and put our 2 bonds of Freescale at par to whoever the lucky strategic winner of that particular auction will be.

As for more near-term shennanigans in the telecom space, keep a close eye out for Nortel. Although the Canadian company's stock price rose by 30% (aka $0.10) today, they have over $100 million in bond payments due on January 15th. While the bonds have run up by a ton in the past month, and the company does have enough cash to buy Platinum VIP service from Spitzer's favorite hooker for at least 4-6 weeks, it is a toss up as to whether or not it will be next week's biggest bankruptcy. Seeing how everybody's favorite thunderthigh reducer was forced to see the inside of 824 N Market Street #500 in Wilmington (see earlier post), we take the under .

Is Business Week merely slapping the faces of all those investors who in recent weeks bought a slew of follow-on stock issued by airline companies (probably the only companies raising capital in the past few months as $35 barrel/oil will undoubtedly last forever), or are they on to something in prediciting the wholescale demise of the industry as we know it. Opinions differ, with some saying airlines EETC's, bank debt and stocks are screaming buys to those who can't wait for the next $20 intraday crude bounce (without a subsequent $40 pullback). Names picked out of the liquidation hat include US Air, Air Canada, Air Tran and JetBlue. Nobody knows the final outcome, but if the recent adoption of an 8th seat across a 737's aisle by discounters to fit all the non-users of Equal is any indication of increasing load factors, it may be some time before we all have to use Greyhound to get to the bi-annual Big Swinging Dick retreats with our Yale lacrosse buddies.
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If only sugar free meant debt free... In sweet vindication for fat people everywhere, Merisant today filed for bankruptcy. The maker of Equal and Canderel fake sugar sought Chapter 11 protection. The Pegasus Capital portfolio company (hm... another obesely levered PE casualty, who'd a thunk it) was "weighed down by too much debt". Too bad there is no such thing as debt-free capitalization additives. And since the company's employees are probably not too amused by fat jokes right now, we at Zero Hedge wish them a speedy recovery to a trim debt-for-equitized state. Svelte restructuring investment bankers are already sharpening their pitch books with the hopes of if not getting the advisory assignment, then at least obtaining a goody bag of 0 calory Sweet Mate (TM) for those 3 am book binding sessions.

One can follow the daily creation and destruction of wealth simply by looking at the constantly shifting landscape in New York. Could Ezra Merkin's recent fall from grace, from the top of GMAC, and potentially from duplex 6/7B spell some days of uncertainty in this otherwise inperturbable bastion of high money, 740 Park. This castle of financial fortitude has boasted amongst its residents Rockefellers, Kennedys, Bronfmans and Saul Steinberg (never said it was scandal-free). Curiously, one may wonder what other champions of capitalism currently reside within its walls... for A notable figure in the HF community, who shall remain nameless but who has been rumored to himself have certain dabblings in the world of beginning P and ending in onzi, can be located on over 20,000 sq. feet in another duplex, at twice the altitude that Ezra sniffs Park avenue's rarefied air (is this a "my ponzy is bigger than your ponzi" pissing contest?).

A very definitive list Michael Gross has done a great compendium of all current residents and can be accessed here.

We shall see how New York's otherwise stiff as a TARP injection co-op boards handle the upcoming wave of Page 6 worthy scandals.